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How Do Government Regulations Affect U.S Businesses?

The heart of the American economy is small businesses. SMBs accounted for 31.7 million in the United States in 2020, that is 99.9% of all businesses. They are at the forefront of commerce, promoting economic growth and dynamism while also increasing job creation and innovation. Small firms are also among the first to face the effects of weak economic growth or bad government policy.

Small businesses are subject to rules imposed by the federal, state, and municipal governments. Governments impose rules on a variety of topics, including environmental standards, employment policies, and advertising practices, among others.

Furthermore, government rules have an impact on how firms are structured. To learn more about the various business structures, read more here. Apart from the business structure. Government rules also impact where businesses choose to be located, how they classify their staff and plenty of other factors. Some of these rules stand out and have a greater impact on companies and employees than others.

Choosing what type of business entity you want to form also indicates what regulations will impact your business. An example of a popular business structure in the U.S is a corporation.

Below we describe a few regulations that affect U.S businesses:

Environmental Regulations

Companies are subject to environmental rules in order to reduce the harmful effects of manufacturing on the environment. For example, the Environmental Protection Agency (EPA) has approved numerous federal bills throughout the years to ensure that businesses have a low environmental impact. The Clean Air Act of 1990, for example, governs how corporations must contribute to lessening air pollution.

Companies that dump their waste materials into hazardous waste sites must either pay the EPA to clean up the site or supply their own workers to do it, according to EPA regulations. In addition, when a company wants to build or extend its facilities, it must obtain permits from the local government. The building should not destroy any wetlands or other protected sites, according to local authorities. Municipalities frequently give land, zoning, and building licenses in exchange for proactive environmental preservation assurances made by the company.

Advertising Regulations

When it comes to developing a company’s network, marketing is essential. Rather than allowing businesses to advertise and market their products as they see fit, the federal government has enacted advertising restrictions to keep things in check.

The policies’ main purpose is to assist firms to be more honest in their advertising and marketing operations. If the government judges that a corporation has withheld critical information or blatantly misled in its public marketing, the company may be forced to pay hefty fines.

An example of how the government has imposed regulations regarding advertising is the Fair Packaging and Labeling Act. The Fair Packaging and Labeling Act requires businesses to not only be truthful in reporting the ingredients in items that customers consume but also to list all of the ingredients (in a certain sequence) as well as the nutritional information for those products. The packaging of a product must adhere to certain requirements. Any information listed on a product must, once again, be true and correct.

Employment Regulations

Employment regulations do not necessarily have a negative impact on a business. These regulations are there to protect the workforce. Small business owners must familiarize themselves with employment regulations in the state(s) where they conduct business, regardless of whether the “workers” are independent contractors, freelancers, or full-time, salaried employees.

Fair pay and hours, retirement and health insurance benefits, workplace discrimination, and unemployment and workers’ compensation compliance are all covered by employment legislation.

Federal Regulations

Despite the prevalence of small businesses, research conducted by the Chamber Foundation demonstrates that federal rules and infrastructure are rising and have a disproportionate influence on small businesses and free enterprise in the United States. The cost of federal regulations alone is projected to be $1.9 trillion per year in direct costs, lost productivity, and increased prices to the American economy. Small businesses with fewer than 50 employees face expenses that are approximately 20% higher than the national average.

The Future of Small Businesses

There are numerous more government rules that affect businesses, and it is critical that business owners remain aware of these restrictions in order to do business effectively while staying within the law’s bounds. Violations of municipal, state, and/or federal regulations can be disastrous for a company, possibly leading to bankruptcy.

These findings are relevant to the political and economic discussion in the United States about how to improve the regulatory environment at all levels of government.

Adriaan Brits

Adriaan Brits is a multi-sector analyst and business consultant with notable commentary on the S&P500. He loves to evaluate fast-movers and to be ahead of the trend.

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